WASHINGTON–Ambassador Susan C. Schwab announced today the outcome of the Bush Administration’s 2006 Annual Review of the Generalized System of Preferences (GSP), a program created in 1974 that provides duty-free treatment to nearly 5,000 products exported to the United States from 131 beneficiary developing countries. As a result of this year’s review, the Administration will continue GSP eligibility for 115 exports from specific countries whose trade exceeded statutory limits in 2006 and terminate GSP eligibility for 21 products from specific beneficiary countries in order to advance a more targeted and effective program to promote economic development.

“Congress created the GSP program to serve as a bridge for developing countries as they increase their participation in the global trading system. It also helps to expand choices for U.S. consumers and industry,” U.S. Trade Representative Susan C. Schwab said today. “The GSP program has proven to be very successful in expanding U.S. trade with developing countries. In part due to the GSP program, the United States

In 2006, U.S. imports from beneficiary developing countries under the GSP program totaled $32.6 billion, a 22 percent increase over 2005. U.S. imports under GSP constituted a significant share of total U.S. imports from several beneficiary countries, including Fiji, Kazakhstan, Paraguay, Tunisia, and Yemen.

The GSP Annual Review focused on several key areas, including consideration of: 1) whether to continue GSP eligibility for products from specific countries that exceeded statutory competitiveness limitations; 2) whether to terminate GSP eligibility for products that could be found competitive or meet other pertinent statutory criteria; and 3) petitions challenging the continued eligibility of certain beneficiary countries for the GSP program. In this year’s review, the Administration granted waivers of the competitive need limitations to ensure continued GSP duty-free benefits to 115 products from 19 beneficiary countries, with an approximate import value of $618 million in 2006.

Consistent with the statutory provisions concerning product competitiveness and after extensive analysis, the Administration determined that 21 products from beneficiary countries can compete effectively in the U.S. market and will no longer be eligible for duty-free treatment under the GSP program. In 2006, such imports were valued at approximately $4.8 billion. This group includes 13 products that exceeded the statutory “competitive need limitations” (CNLs) and eight products that had been granted waivers to the CNLs at least five years ago and are now subject to statutory “super-competitiveness” thresholds.

With respect to this year’s decision to revoke waivers that had previously afforded GSP preferences to certain globally competitive foreign suppliers, Schwab commented, “The eligibility determinations made in this year’s review fulfill the intent of the recent Congressional amendment that GSP continue to serve as a powerful development tool, particularly for the world’s poorest countries. The statute indicates that well-established, globally competitive industries based in developing countries should compete on a level playing field with their counterparts. This will preserve GSP tariff advantages for nascent sectors that are intended to be the focus of the GSP program. Indeed, the ability of these industries to compete in global markets is testament to the success of the GSP program in helping to cultivate competitive industries in a number of developing countries."

Imports that exceeded the new statutory threshold in 2006 established by Congress and that have been removed from GSP eligibility are: brake and brake parts and ferrozirconium from Brazil; kola nuts from Cote d’Ivoire; gold jewelry and brass lamps from India; wiring harnesses from the Philippines; gold jewelry from Thailand; and methanol from Venezuela.

The Annual Review also involved an analysis of petitions to withdraw or limit a country’s GSP benefits for not meeting GSP eligibility criteria. These criteria include the extent to which a country provides adequate and effective protection of intellectual property rights (IPR) and whether a country is taking steps to afford internationally recognized worker rights. During the Annual Review process, a review of the worker rights petition regarding Uganda was closed without altering the country’s GSP eligibility based on passage of legislation facilitating organization of unions, and apparel sector owners and unions reaching a first-ever labor agreement.

Petitions involving the following GSP beneficiaries remain under review: Lebanon, Uzbekistan and Russia regarding IPR concerns, and Niger regarding worker rights. With respect to the Russia IPR petition, the Bush Administration continues to monitor closely the Russian government’s progress in meeting the commitments it undertook in the November 2006 Agreement on IPR and to seek further progress in the context of ongoing WTO accession discussions.

Background

The Trade Act of 1974 created the GSP program. Under the program, 131 beneficiary developing countries, including 42 least-developed beneficiary developing countries, currently export approximately 5,000 products duty-free to the United States.

In 2006, the United States extended duty-free treatment under the GSP program to imports worth $32.6 billion from eligible beneficiary countries, an increase of 22 percent over 2005. The majority of products imported from beneficiary countries are eligible for GSP benefits, with a significant exception being textile and apparel products.

Each year, the United States conducts an annual review under the GSP program to determine if there are certain imports currently eligible for benefits that could compete effectively in the U.S. market if imported at normal tariff rates. In making decisions on product eligibility, the Administration considers petitions to continue duty-free treatment, holds public hearings, and reviews analyses prepared by the U.S. International Trade Commission of the economic impact of eligibility decisions on domestic industries.

The GSP statute includes two “competitive need limitations” (CNLs) on the eligibility of a product for benefits under GSP: (i) if the annual trade of a product from a specific country exceeds a value-based threshold ($125 million in 2006); or (ii) if the annual trade of a product from a specific country exceeds 50 percent of total U.S. imports of that product. The statute also authorizes the President to waive the application of these limitations if certain statutory conditions are met.

Any CNL waiver granted remains in effect until the President determines that such waiver is no longer warranted due to changed circumstances. In December 2006, Congress amended the GSP statute to provide that the President should revoke any existing CNL waiver that has been in effect for five years or more if a GSP-eligible product from a specific country has an annual trade level in the previous calendar year that exceeds 150 percent of the annual trade cap or 75 percent of all U.S. imports of that product.

USTR will publish further details on the results of the annual review in the Federal Register.